4 Ways to Detect a Credit Repair Scam

By: Stuart Hunter

The Federal Trade Commission (FTC) is charged with the enforcement of consumer protection law and is responsible for shielding you and me against companies that attempt to get our business through false claims and, quite simply, by breaking the law. With regards to credit repair scams, practices like this became so common that Congress passed a federal law to outline how credit repair organizations can operate. The Credit Repair Organization Act (CROA) was passed to protect consumers and provide them with recourse if they are victimized by a dishonest credit repair organization.

When researching credit repair organizations, there are some glaring red flags alerting you to steer clear. According to the FTC, avoid services that:

Request Payment Before Services are Performed - Credit repair companies should not require payment prior to services being rendered. Under the Credit Repair Organizations Act, these companies cannot require payment until after they have completed the services promised. This is to protect people from companies that charge large upfront payments and then do not perform the agreed upon work.

Fail to Disclose Your Rights - Legitimate credit repair companies will let you know that you have a right to order one free copy of your credit reports every 12 months from the credit reporting agencies, and that you are able to dispute questionable items on your own , free of charge. If a company does not alert you to this information, specifically in the form of a CROA required disclosure titled "Consumer Credit File Rights Under State and Federal Law", you should probably look elsewhere.

Advocate Using a New Credit Identity - Some sketchy credit repair companies will actually go so far as to advise you to create a new credit identity by using an Employer Identification Number (EIN) in place of your Social Security number. This is a serious crime and if anyone suggests this as an option, run the other way.

Lie About Services They Can Provide - Watch out for credit repair companies that guarantee to remove negative and accurate items, such as late payments and foreclosures, from your credit file. No one can guarantee that items will be removed, particularly if the items are true.

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Serving clients for over 18 years, Lexington Law prides itself on operating in strict compliance with the laws governing credit repair companies. Lexington Law's credit repair services have assisted clients with the removal of millions of negative items including late payments, collections, charge offs, and bankruptcies.

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